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Alborosie
3 years ago
5

(Calculating the cash conversion cycle) Network Solutions just introduced a new, fully automated manufacturing plant that produc

es 2,000 wireless routers per day with materials costs of $50 per router and no other costs. The average number of days a router is held in inventory before being sold is 45 days. In addition, the company generally pays its suppliers in 30 days, while collecting from its customers after 25 days.
a. What is the cash conversion cycle?

b. What would happen to the cash conversion cycle if the company could stretch its payments to suppliers from 30 days to 50 days?

c. How much would working capital financing be reduced if the company stretched its payments to suppliers from 30 days to 50 days?
Business
1 answer:
forsale [732]3 years ago
3 0

Answer and Explanation:

The computation is shown below:

a. As we know that

Cash conversion cycle is

= Days inventory outstanding + days sale outstanding - days payable outstanding

= 45 days + 25 days - 30 days

= 40 days

b. Now if the payment of supplier changed from 30 days to 50 days which is

Cash conversion cycle is

= Days inventory outstanding + days sale outstanding - days payable outstanding

= 45 days + 25 days - 50 days

= 20 days

c. Now the reduction in working capital is

= Difference in days × production × material cost per order

= 20 days × 2,000 × $50

= $2,000,000

We simply applied the above formulas

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Answer:

If the effective tax rate increases then the net savings coming from investments will get lowered as a result the investment will have higher payback period (The increase in effective tax rate would lower demand of the product which means there is decline in net saving arising from the sale of the product). Likewise this decrease in annual net savings will also decrease the internal rate of return which shows that their are increased chances of project rejections. The NPV method is based on cash flows and relevant costing just like IRR and payback method but the only difference is that it assumes that the cash earned would be reinvested at cost of capital. The NPV will also decrease due to increased effective tax rate.

4 0
3 years ago
In the late 1970s Federal Reserve Chairman Paul Volcker contracted the money supply to reduce the rate of inflation. One result
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Answer: to increase interest rates which reduced aggregate demand.

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Since the money supply was contracted to reduce the rate of inflation, this will lead to increase interest rates which reduced aggregate demand.

In this case as a result of the increase in the interest rate, people will prefer to save their money in the banks and thus will result in less money in circulation which ultimately reduces the demand for goods and services.

8 0
2 years ago
Which of the following best represents the pricing behavior of firms in a monopolistically competitive industry?
allochka39001 [22]

Answer:

The correct answer is option B.

Explanation:

A monopolistic firm is characterized by a large number of buyers and sellers in the market producing differentiated products which are close substitutes, there are relatively easier entry and exit in the market.  

In the given question, Teen Angle Hardware is looking for a niche or a slightly differentiated product to sell to teenagers. But is able to earn only a normal profit because there is a large number of firms in the market. And new firms can enter the market in the long run. So, this firm is an example of a monopolistic firm.  

3 0
3 years ago
g Compare and contrast a four Ps approach to marketing versus the value approach (creating, communicating, delivering and exchan
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Answer:

The 4Ps are Product, Pricing, Promotion, Place.

Explanation:

Thinking about it carefully, one would note that there is really nothing to contrast between the value approach which is Creating, Communicating, Delivering and Exchanging Value.

Let's make the comparisons:

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The inherent quality of a Utility or Product or Service is that they are value which is Created. So in describing the marketing approach, one can use both interchangeably.

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Again there is a parallel here. Price is the value you have put on your product or service. Without price, it's difficult to exchange value. Again in the marketing process/approach, it's difficult to separate the two. In both approaches, pricing and Exchanging Value as steps in the marketing approach can be used interchangeably.

  • Communicating vs Promotion

This is also another parallel. Promotion is simply another way to communicate the value of your product. Both are really not different.

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Place under the 4 Ps approach speaks to the location where the product is delivered. Again it's clear to see that both cannot be separated.

In conclusion, assuming all factors are the same and held constant between two companies A and B, if company A follows the 4Ps approach and company B follows the Value approach, they are most likely to arrive at the same results.

Cheers!

5 0
3 years ago
Consider the following events:
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Answer:

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I hope my answer helps you

4 0
3 years ago
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